Bill to regulate Civic San Diego faces 11th-hour opposition

The nearly two-year battle over the fate of Civic San Diego has landed on Gov. Jerry Brown's desk in the form of AB 504. Authored by Assemblymember Lorena Gonzalez, the bill would allow nearly all projects approved by the land-use nonprofit to be appealed to the City Council.

Having fought unsuccessfully for months to kill the legislation, the local business community has launched a vigorous last-ditch effort, including a widespread letter-writing campaign and hiring a long-time friend of the governor to lobby for a veto.

“We are not fighting against oversight,” said Kris Michell, CEO of the Downtown San Diego Partnership. “We are fighting for certainty in the process.”

Arguing the proposed appeals process could stifle real estate investment, the Downtown San Diego Partnership and the San Diego Regional Chamber of Commerce have, over the last five months, spent tens of thousands of dollars lobbying against the bill.

While previous efforts have fallen short, the Downtown San Diego Partnership has refused to give up. It hired the Crane Group in September, according to a disclosure report. The president of the Washington, D.C.-based lobbying firm, Lucie Gikovich, is widely known as Brown's close friend, having served as his confidential secretary during his first terms as governor, as well as a staff member during his time as mayor of Oakland.

Stopping the bill is “very important,” said Michell, acknowledging the hiring of Gikovich. “If investors get spooked, they'll take their money elsewhere.”

The legislation seems, in large part, a backlash to longstanding resistance by Civic San Diego officials to imposing labor agreements on large development projects downtown, especially for hotels. A former CEO and Secretary-Treasurer for the San Diego and Imperial Counties Labor Council, Gonzalez has repeatedly attacked the nonprofit for favoring developers over workers.

“There are tens of thousands of low-wage tourism workers downtown that don't have the means to hire well-connected, expensive Washington lobbyists to plead their case,” she said. “Gov. Brown knows that signing this bill would put San Diego back on track with every other city when it comes to local decision-making over development.”

The city of San Diego is the only government agency in California to outsource its permitting and planning authority to an outside agency. Rather than city staff, Civic San Diego, a city-formed nonprofit, approves development projects downtown.

Appointed by Mayor Kevin Faulconer, the president of Civic San Diego is a longtime local developer. The nonprofit's nine-person board of directors, also appointed by the mayor, includes land-use attorneys that work for developers. Fees collected from developers largely sustain the roughly 30-person agency.

Some view this experiment as positive, including Pat Stark, chair of the Downtown Community Planning Council. Stark staunchly backs Civic San Diego's track record of downtown development and opposes the bill.

“I'd be really disappointed if it passed,” he said. “I've worked with Civic now for 20 years, and I think that they have been an asset to the community.”

From others' point of view, the nonprofit's structure creates a conflict of interest. Earlier this year, Civic San Diego board director Murtaza Baxamusa filed a lawsuit alleging the nonprofit was acting without proper government oversight. The lawsuit is on hold pending the outcome of the bill.

“It's not very clear to me why they're launching an all-in campaign against the bill,” said Baxamusa, who also works for the San Diego County Building and Construction Trades Council Family Housing Corporation. “I'm thinking that they have something to hide in terms of the sweet deal that they have with the current system.”

Under its former name, Center City Development Corporation, the land-use nonprofit doled out redevelopment funds. After Gov. Brown dismantled redevelopment in 2011, the agency was rebranded as Civic San Diego and tasked with winding down the tax-increment financing program.

Civic San Diego officials, the mayor's office and the downtown business community didn't want to see the nonprofit get phased out with the end of redevelopment. In an effort to provide additional funding streams for the nonprofit, officials applied for millions in federal New Market Tax Credits to subsidize development projects in low-income neighborhoods.

However, compared to redevelopment funding, these federal tax credits had looser requirements, such as for affordable housing. In response, a minority coalition on the Civic San Diego board, community organizers and labor organizations launched an unsuccessful campaign to impose a so-called community-benefits policy on the nonprofit that would've outlined specific requirements for publicly funded projects.

“It's pretty simple, local hire, quality jobs, public accountability—these are things that ought to be a no-brainer with respect to publicly funded projects, but really we've just been stonewalled at every step,” said Dale Bankhead, political and legislative director for the San Diego and Imperial Counties Labor Council.

Civic San Diego, the mayor's office and the business community were unshakably opposed to anything that created binding requirements, arguing again that it would scare off real estate investors. In the end, the nonprofit adopted a community-benefits policy with broad intentions but no specific requirements.

“Civic San Diego fully engaged all stakeholders, including labor, and arrived at a community benefits agreement that took diverse interests into account,” said Jeff Gattas, chair of the Civic San Diego Board of Directors. “That labor failed to get complete agreement on all their demands does not constitute a lack of engagement or consideration.”

Feeling shut out, labor and community organizers quickly rallied around the idea that Civic San Diego needed reform, creating the political conditions for Gonzalez to move her bill. As a result, not only publicly financed projects, but nearly all downtown development could face increased pressure for labor and wage agreements, especially if the City Council is amenable to the idea.

The governor has until mid-October to sign or veto the bill. Depending on his decision, blocking labor's initial push for a binding community-benefits policy could end up looking like a rare strategic blunder for the downtown business community.